A budget is a plan for how much income is coming in and going out over a certain period, whether it’s a month, quarter, or year. It helps individuals and businesses identify their needs versus wants, control wasteful spending, and reach financial goals. There are many different types of budgets, tailored to fit various income levels and lifestyles.
An operating budget includes detailed projections of operational expenses like salaries, benefits, R&D, and infrastructure, and ties them to company priorities. This allows organizations to track progress toward short-term financial goals, like expanding into new markets, and long-term goals like reducing debt and increasing profits.
A cash budget zeros in on when money will come in (inflows) and when payments will need to be made (outflows). This type of budget is critical for maintaining liquidity, preventing cash shortages, and managing debt.
The master budget is a comprehensive overview of corporate finances, tying departments’ individual budgets to overall company goals. This allows leaders to monitor progress, make informed decisions, and drive sustainable growth.
A personal budget focuses on expenses for a single person or family, such as rent or mortgage, utilities, food, and debt payments. It’s helpful to review past spending over a few weeks or months before creating a budget, using whatever tool works best for you: a budgeting app, spreadsheet, online template, or pen and paper. Reviewing your spending can help you spot opportunities to cut costs, such as identifying habits that add up: $2 a day at the vending machine or dining out three times a week could total over $300 per month.
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